Buy SBI Cards; target of Rs 851: Geojit

Geojit's research report on SBI Cards

SBI Cards & Payment Services (SBI Cards) is the leading issuer of credit cards in India. Company offers wide range of value-added payment products and services. SBI cards operates in more than 130 cities in India. Net interest income grew 52.2% YoY in Q1FY21, aided by NIM expansion (+414bps YoY) with improved interest yield and lower cost of funds. However, Non-interest income declined 37.6% YoY. Company added 288k new accounts during the quarter. Cards in force inched up 0.5% QoQ to 10,602k, while Spends per card fell to Rs. 72k from Rs. 126k in Q4FY20, impacted by lockdown. PAT rose 13.8% YoY, aided by higher income and lower costs. Overall cost to income ratio improved 635bps YoY to 47.2%. Growth momentum should pick-up in retail credit activity and daily spends in the coming months.

Outlook

Given current upside potential, we rate a BUY on the stock with a TP of Rs. 851 based on 10x FY22E BVPS.